Good evening. I‘m Chris Matthews in Washington, snowy Washington. Leading off tonight: Does she go for it? Does Sarah Palin want to be a major figure in this country, perhaps even president, or does she want to milk her past political career for glitzy celebrity? Is this all sizzle, or is there some steak in all this Palin-palooza?

If she scores a front page on Sunday morning, this Sunday morning, off her Saturday night performance at the tea party convention down in Nashville, you will know she‘s a heavyweight. If not, you‘ll know she‘s headed for something, well, short of Oprah, which isn‘t bad in the financial department but is no interest of the country, certainly not right or left. Watch and see if she follows through, for example, on her attack on Rahm Emanuel. If she really hits him with all her might for his offhand remark about the liberal net rooters being, quote, “retarded,” and tries to really destroy the president‘s chief of staff, you‘ll know she‘s got the killer instinct.

Palestinians: President Obama says the dip in the unemployment rate to 9.7 today is a cause for hope. Well, let‘s hope he‘s right. We‘ll get some expertise on that tonight.

And sex, steroids, domestic violence, throw in a prostitute and a knife at her throat—the new Democratic nominee for lieutenant governor of Illinois, a perfect fit.

Also, is former New York governor Eliot Spitzer trying to make a comeback? Let‘s check out that one, too.

Finally, Super Bowl Sunday. Democrats are rooting for one team, Republicans for the other. Can you guess who‘s rooting for whom? We‘ve got the numbers in the HARDBALL “Sideshow.”

Let‘s start with Sarah Palin—Sarah Palin. Former DNC spokesman—spokesperson Karen Finney is now an MSNBC contributor—I‘m glad to see that—and Republican strategist Ron Christie was an adviser to George W. Bush and Dick Cheney.

Well, let me ask you about this wide-open question. Is Sarah Palin a heavyweight or just a great sort of media funster, somebody who knows how to make some money, give some speeches, and then we‘ll see her again maybe in a few months, but she won‘t really matter?

KAREN FINNEY, FORMER DNC SPOKESPERSON, MSNBC CONTRIBUTOR: At this point, she‘s more of a funster. I mean, she has raised some money...

MATTHEWS: I taught you that word!

FINNEY: You did teach me that word, Chris!

(LAUGHTER)

FINNEY: Taught me everything I know. You know, what‘s interesting is if you look at the three big successes that the Republicans have had in Massachusetts, Virginia, New Jersey, one key element, no Sarah Palin.

MATTHEWS: She wasn‘t asked for.

FINNEY: She wasn‘t asked to come. So in terms of—if you‘re a political heavyweight, you know, you‘re asked to come in and weigh in and campaign with someone because there‘s an expectation you‘re going to help deliver votes. I don‘t think we see her as somebody who can deliver votes.

MATTHEWS: OK. But she has been invited to Nashville tomorrow night, and she is going to make over $100,000 for her honorarium. And the question is, Will she go for the fences say something Saturday night that hits the front page of the major newspapers Sunday morning? That‘s my home run reading on her. I think she‘ll try to do it. I‘m not sure.

RON CHRISTIE, FORMER ADVISER TO GEORGE W. BUSH AND DICK CHENEY: I

think she could. And I think—you know, to Karen‘s point, I think Sarah Palin right now is a political personality. Right now, she‘s out there, she‘s selling books, she‘s elevating her profile. I think from her speech tomorrow night, we‘ll see, what does she envision for herself for the future? Doe she go out, swing for the fences, try to take down Rahm Emanuel, take a shot at the White House, or will she play the safer route, sell some more books, get some notoriety, but not try to really elevate her political career? Could be very interesting to see what she does.

MATTHEWS: Well, to me, the question of using the “R” word, or “retarded,” or calling somebody a “retard,” those kind of words are out because...

FINNEY: Absolutely.

MATTHEWS: ... there‘s much sensitivity now and understanding...

CHRISTIE: Right.

MATTHEWS: ... of the challenge of development and the whole question of diagnosis of these problems and the feelings people get when you use those words. Fair enough. It‘s not about whether she was right to call Rahm Emanuel on that. But if she wanted to call him on it and say, We all ought to learn from this and stop doing it, that‘s one thing. But will she use it to nail him? We‘ll know tomorrow night.

FINNEY: I think you‘re right. But...

MATTHEWS: What do you think I‘m right about?

FINNEY: I think you‘re right that if she goes for it, then we know...

MATTHEWS: And says, I want him out of there.

FINNEY: ... then we know a little—or talks—you know, goes after it in terms of how inappropriate it is or what have you, then we have more of a sense of the—as you said, the killer instinct because her book didn‘t really lay out any kind of political killer instinct. We haven‘t really seen that yet.

However, if you‘re going to go after Rahm Emanuel, then you can‘t be a hypocrite. You better go after Rush Limbaugh. And Boy, I tell you...

MATTHEWS: Did you notice that he can use the “F” word and nobody thinks anything of it?

FINNEY: Right!

MATTHEWS: Just don‘t...

(CROSSTALK)

MATTHEWS: Let‘s take a look at Sarah Palin‘s schedule. It is quite impressive. Here‘s what Palin wrote in her FaceBook, by the way. “I‘d ask the president to show decency”—well, here‘s her schedule—here‘s her FaceBook, first of all. “I‘d ask the president to show decency in the process by eliminating”—I love that word! -- “on member of that inner circle, Mr. Rahm Emanuel, and not allow Rahm‘s continued indecent tactics to cloud efforts. The Obama administration‘s chief of staff scolded participants in his strategy session, calling them”—you know, the word we were just using—“according to several participants, as reported in ‘The Wall Street Journal.‘ Just as we‘ve been—we‘ve been appalled at any public figure of Rahm‘s stature ever used the N word or any such inappropriate language, Rahm‘s slur on all God‘s children with cognitive and developmental disabilities and the people who love them is unacceptable and is heartbreaking.”

MATTHEWS: This lady has got a hell of a schedule. Can we look at this schedule of Sarah Palin and what she‘s got scheduled for the next couple weeks? It‘s really impressive. On February 6th, she‘s the keynote speaker, that‘s tomorrow night. The next morning, she gets up and does Chris Wallace on FOX Sunday morning. Later Sunday, she campaigns with Texas governor Rick Perry, the secessionist down in Texas. On February 16th, she‘s keynote speaker for the Republican Party of Arkansas in Little Rock. March 26th and 27th, she campaigns and raises money with John McCain, her sponsor. March 27th, she headlines a party rally in Harry Reid‘s hometown of Searchlight, Nevada. April 7th, she campaigns with, well, her wannabe, Congresswoman Michelle Bachmann in Minnesota, in her congressional district. Speaks to the Southern Republican Leadership Conference later. It‘s going to be held on April 8th. And up to 11th in New Orleans. What a packed schedule...

FINNEY: Is she getting paid (INAUDIBLE)

MATTHEWS: ... to reach the Republican right.

CHRISTIE: But it only reinforces what I said earlier. Is she a personality or...

MATTHEWS: This is roller derby here! He just said (INAUDIBLE) Just a minute. He jams his elbow over there!

CHRISTIE: This is HARDBALL.

MATTHEWS: OK.

(LAUGHTER)

CHRISTIE: But my point being, I think she‘s reintroducing herself to a lot of people who have been skeptical of her. What does she stand for? And she‘s going to go out and make some serious speeches.

MATTHEWS: Would you vote for her...

FINNEY: But you know...

MATTHEWS: ... for president or vice president?

CHRISTIE: I would have to see who else is running.

FINNEY: But wait a second. There‘s something about Sarah Palin. You know, in the same way that when we saw her at the convention and we all thought, Wow, this woman‘s impressive, and two weeks later, we realized, Oh, maybe not all that we...

MATTHEWS: Some people think they‘re more impressed with her! Wait‘ll you see the crowd tomorrow night!

FINNEY: OK. Btu, however, we‘re learning—OK, but how about those e-mails that MSNBC uncovered today about Todd Palin‘s role—bigger role in government and...

MATTHEWS: So what did you make of those, now that you‘ve introduced them? MSNBC.com investigative reporter Bill Deadman (ph) reports on newly released e-mails mentioned by Karen Finney that show that Palin, quote, “coached her staff to disguise the amount of electrical work needed to hook up a tanning bed set up in the governor‘s mansion. Palin stewed when the state public safety department wouldn‘t provide a plane for her children so they could attend a bill-signing event in her husband‘s home town. Her scheduler looked for public events that coincided with her daughter‘s trips to justify charging the state for them.”

Is this small potatoes?

FINNEY: No, it talks—it‘s...

MATTHEWS: Is it small potatoes?

FINNEY: It‘s relatively...

MATTHEWS: You‘ve worked in politics.

FINNEY: I have. But it‘s relatively small potatoes. But I‘ll tell you something. It speaks to a belief that you can use the government, misuse the government, those government dollars, the taxpayer dollars, by the way, and massage it so that you can get what you want. That is exactly the kind of...

that‘s exactly the kind of thing that she‘s talking—speaking out against. So it‘s incredibly hypocritical. You know it, Ron!

CHRISTIE: OK. OK. Let‘s...

FINNEY: You know -- - you know that game! We all know that game.

CHRISTIE: ... hypocritical. Let‘s look at Speaker Pelosi for the last two years, spent over $2 million on travel, and she spent over $100,000 on food and beverages. Booze—when I flew on Air Force 2, I had to pay for my food. I had to pay for my beers that I threw down. Why doesn‘t Speaker Pelosi? You‘re not making an issue of...

FINNEY: Because we‘re not talking about Speaker Pelosi, we‘re speaking specifically about Sarah Palin. And my point is we‘re learning more—we‘re learning more and more about Sarah Palin, and the more we learn, the more it‘s unclear who she really is and what her real agenda is.

CHRISTIE: And we‘re talking about...

FINNEY: I think her agenda‘s really about her.

CHRISTIE: And we‘re talking about a former...

FINNEY: And selling books.

CHRISTIE: And we‘re talking about a former elected...

FINNEY: Would you vote for her?

CHRISTIE: We‘re talking about a former elected official...

FINNEY: Would you vote for her?

CHRISTIE: ... versus the Speaker of the House. The Speaker is defrauding the taxpayers by wasting their money, and you‘re still talking about Sarah Palin‘s e-mail.

CHRISTIE: Well, actually, Chris, for those of us who work in the White House, including the president and the vice president, you have to pay for your food and you have to pay for your expenses. The distinction I‘m drawing with the Speaker, Karen, is that the taxpayers footed that. This is small potatoes. No one cares whether or not...

MATTHEWS: Coming up: President Obama is touting the lower unemployment rate, as he should. It‘s down to 9.7. So is this something good happening, or is it not, or is this just a lucky number? Is it dropping for real or just slightly and going back up again? And by the way, why is the market so terrible at the end of this week? CNBC‘s Jim Cramer gives us the smarts coming up next.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Today we received additional news suggesting that we are climbing out of the huge hole that we found ourselves in. It is encouraging, the job loss in January was a small fraction of what it was a year ago and that the unemployment rate last month went down and not up. Understanding that these numbers will continue to fluctuate for months to come, these are welcome, if modest, signs of progress along the road to recovery.

(END VIDEO CLIP)

MATTHEWS: Welcome back to HARDBALL. President Obama touted the dip in the unemployment rate, down to 9.7, down from 10 percent. Let‘s look and see if it‘s a real sign that things are looking better.

Jim Cramer is the host of CNBC‘s “Mad Money.” So is it a welcome sign? It‘s welcome, but is it a leading indicator that things are getting better, Jim Cramer?

JIM CRAMER, CNBC‘S “MAD MONEY”: Absolutely. Absolutely, Chris. I think the most important part of it was that overtime hours soared. That‘s what happens right before companies say, You know what? We can‘t keep working these people this hard. We‘ve got to bring people in. We‘ve got to hire. This was the first sign of that. And manufacturing employment was terrific.

MATTHEWS: Well, just like the fact that inventories we‘re getting—we had to deal with inventories, now we‘re dealing with overtime, all good indicators. Let me ask you, like most people, I sit and watch the market every day here on MSNBC. It‘s always up on the wall. We‘re always looking at it. You‘re always on it. How can the unemployment rate be going down, even if a little bit, while the market had a really bad couple of days, three or four days?

CRAMER: Well, OK, our market has become what‘s known as very thin. It means it could be moved. Today, I found out that there was about $100 million for sale in the market that was margined to about a billion, knocked the Dow down 163 points. The seller finished at 3:00 o‘clock, and then the market closed up. That‘s how ridiculous our market‘s gotten.

Most of the selling is coming from Europe, Chris, not from here, people trying to liquidate our stocks in order to be able to have some money because of the problems in Greece and Portugal and Spain.

MATTHEWS: OK, let‘s talk about the president. He‘s talking about a jobs bill, $100 billion bill out of the Senate. Is that going to do anything to the market? Is it going to do anything to unemployment?

CRAMER: Not really. I mean, look, if it gave us a highway bill, I tell you—I would see that because the companies that are starting to hire are companies that make heavy machinery. But it‘s not for heavy machinery use here, it‘s for overseas. We could participate in that with a highway bill. All the other stuff I think really doesn‘t matter. There are—look, you can tell small businesses that they can go get loans, but the small business applications for loans are down dramatically. The dogs won‘t eat it!

MATTHEWS: OK, let‘s talk about the fact that the president—what he‘s going to do this year. Is there a sense that Geithner‘s going, that he‘s going to do something this year to dramatically improve the way the public looks at him in this time of tremendous political turbulence with the tea party stuff and everything else? Doesn‘t he have to do something to show he hears the country‘s anger, or not?

CRAMER: Actually, I think he does, but he doesn‘t need to attack business as much as he needs to attack those who are saying to him that—you know, the tea party people, who basically want to just bring back the most vicious laissez-faire ideas, and they didn‘t work! He ought to talk about how the tea party guys had their shot and gave us what we have, which is horrible!

MATTHEWS: You mean come out and say tax cutting has not been the solution to America‘s energy, economic, education, health care, whatever challenges?

CRAMER: Well, that‘s great. Those people, whoever they were, they got the tax cuts. Now my kids have to pay for their tax cuts. It wasn‘t supposed to happen to, like, 2020, 2030. Look, the guys who rolled everything back just made it so that there was a bigger bill later, and you know, the bigger bill is coming due right now. I was hoping it wouldn‘t come due until I was on Social Security!

Steve—thank you. Coming up right now, Steve Pearlstein‘s a business columnist for “The Washington Post.” You wrote a hell of a column today, Steven. I do read your column. You said something brilliant. Now, we watch all this stuff about how the Massachusetts election changes everything. That means only 59 senators, 41 Republicans. But it seems to me 41 Republicans means they can stop anything. That means they‘re part of the solution. They‘ve got to give in once in a while, or else nothing will get done. Your solution? What‘s the message?

STEVEN PEARLSTEIN, “WASHINGTON POST”: Well, the solution is these guys have to learn again what it means to compromise. You know, we hear all this thing about compromises. Well, let‘s find common ground. You agree on something, we agree on it, let‘s do it. That‘s fine. That‘s a great place to start. That‘s not very much ground. That‘s a real small part, that common ground.

Compromising means this, Chris. What do you need, Chris? I need A, B and C, says Chris. I say, OK, I need D, E and F, OK? So let‘s start with that. Now, there‘s all these other things we have to deal with. You give in on a few, I‘ll give in on a few. You know, I hold my nose, you hold my (SIC) nose, we get through this thing.

But the other thing we‘ve got to remember is that one party won the election and another party didn‘t, and the party that won the election has 59 votes. That‘s a lot of votes. That‘s the second biggest majority in—you know, in the post-war era. The 60 was the largest.

PEARLSTEIN: Well, there isn‘t because they think that it‘s better politics for them. They hold the ball, to use your analogy.

MATTHEWS: Yes.

PEARLSTEIN: Nothing gets done. And then they blame the other guy for nothing getting done and they hope they get to be in charge.

So, what happens? They get into office. They get the majority.

MATTHEWS: I don‘t understand this politics.

PEARLSTEIN: They serve and nothing happens.

(CROSSTALK)

MATTHEWS: When Reagan ran, he said, I‘m going to cut taxes 30 percent. The Democrats dickered and forth, back and forth, argued, dickered about it, got down to 25 percent. They said OK. He got a majority.

MATTHEWS: It seems like you negotiate things. Why don‘t the Republicans say, we will back your health care bill if we can do tort reform, if we can get interstate competition for insurance?

PEARLSTEIN: Right.

MATTHEWS: Why don‘t they do that?

PEARLSTEIN: Why don‘t they do it? Because they would rather have nothing, because they would rather play political games. They think in the long run, their side will do better. They will get back in power.

MATTHEWS: And then what?

PEARLSTEIN: But that‘s what they don‘t understand.

(CROSSTALK)

PEARLSTEIN: They get back in power and then it will get done to them what they did the other guys and nothing gets done.

MATTHEWS: So, Bush leaves office kind of in ignominy. Barack Obama has one term. Carter had one. We have—every three or four presidents, we have a two-term president who squeaks in by doing school uniforms or cutting his sales, right?

PEARLSTEIN: Right. Right.

And so what is Obama going to do? He has got to call them on it.

He‘s got to make this the issue. The issue is, the system doesn‘t work.

MATTHEWS: OK.

PEARLSTEIN: And these guys are the problem.

MATTHEWS: But did you see the guys laughing at him in the State of the Union? He says we have got to make a deal on health care, for example,. OK. That‘s his program. I‘m looking up at Cornyn, the head of the Republican Campaign Committee, whose job is to elect Republican senators. He‘s chuckling. And Mitch McConnell does his best imitation of a laugh. They‘re both laughing at him up there.

PEARLSTEIN: Well, they might not be laughing if he makes them the issue. And that‘s what he‘s got to do. And that is what Harry Reid has got to do.

He‘s got—today, we found out that one senator was putting a hold on every nominee coming before the Senate. So, nothing could come up. So, what Harry Reid has got to do is got to say, OK, well, if you want to filibuster this, come on. Let‘s go, guys. Let‘s start right now. We‘re going to go 24/7. And the whole country will watch you filibuster every nominee here.

MATTHEWS: OK. Let‘s go back to your idea again. Your column was great, because it said that it‘s the goal of the party with the most votes to propose. It‘s the responsibility of the party with lesser votes, the minority party, in this case the Republicans, to respond and put a deal on the table.

PEARLSTEIN: Right. So, get them to respond. But, you know...

MATTHEWS: That would be democracy.

PEARLSTEIN: Part of it is...

MATTHEWS: If we operated this way, we would never have had a Constitution. We would never have agreed on a draft of the Declaration of Independence, because one side, the Federalists, would have said, how about this? And the Democratic Republicans would have said no.

And that would have been it. Instead they agreed to put the city here in Washington, instead of Philly or somewhere.

PEARLSTEIN: So, before you can get anything done, health care, jobs, anything, you have got to fix the system, because, if you don‘t do that, you can‘t do...

(CROSSTALK)

MATTHEWS: That‘s where I disagree with people on right and left around here. Everybody wants it their way. And I am an absolute believer we need to get our government working right. That‘s the most important thing. More important than health care, more important than anything else is to get our democracy functioning again.

Anyway, Steve Pearlstein, great column for “The Washington Post.”

Up next: the politics of the Super Bowl. Let‘s see which side, which one—you can probably figure this one out. Who are the Democrats rooting for, New Orleans or Indianapolis? Think it through. I will bet you could figure it out.

STEWART: I‘m not going to be your V.P., because I know what that‘s going to be. I get one job, and that‘s to light the White House menorah. Not interested.

(END VIDEO CLIP)

MATTHEWS: Until that last crack, I think Stewart showed himself a serious man.

I do not understand why Bill O‘Reilly, given this chance for a serious discussion, turned to the bullying tactic of mocking real-world concerns over climate change.

What is this thing about refusing to accept science? Does everything have to be a schoolyard taunt or a demonstration of macho?

Next: Does American partisanship bleed into sports? A new poll shows yes. Public Policy Polling took at look at who is cheering for the New Orleans Saints and the Indianapolis Colts this Super Bowl Sunday and broke it down by party I.D. This is fascinating.

Democrats are cheering for the Saints by a 15-point margin, 36-21. Republicans are narrowly for the Colts, 26-25. So, where do the independents, the ultimate arbiters, stand? They join Democrats in breaking for the Saints 33-20.

I‘m rooting for the Saints. And I‘m rooting for the Saints. I love New Orleans. And Drew Brees—Drew Brees is a dynamite quarterback.

Finally, couldn‘t make it out—couldn‘t make it to the Tea Party convention this year? Well, here‘s what you‘re missing. Today‘s workshops are entitled—catch this—“U.S. Government Bankruptcy: Facts for Citizens Who Don‘t Have Finance Degrees.” Also, “Five Easy Fixes to the High Cost of Mass Immigration.” Whoa. And “Green Hell: How Environmentalists Plan to Control Your Life and What You Can Do to Stop Them.”

I think that last one sounds like, of course, O‘Reilly. I don‘t get it.

Another day, another out-of-tune comment from Michael Steele, chairman of the Republican Party. Yesterday, the chairman was whacking at the president‘s tax cut plan for just families making under $250,000. Steele stuck up for those making more, saying—quote—“Trust me, after taxes, $1 million is not a lot of money.”

Hmm. Love that stand. And that‘s our “Number” tonight, $1 million, not a lot of money to Michael Steele. Talk about being out of touch in a country where the median family income is $50,000 a year -- $1 million, tonight‘s “Let them eat cake” “Big Number.”

Up next, if you thought B-Rod was bad, Democrats in Illinois are looking for a way to dump the guy who just won the nomination for lieutenant governor. A prostitute he was living with says he held a knife to her throat. How is that for starters? And it gets worse. Well, it‘s at least as good as that for a while.

Stocks clawing back into positive territory at the close, after spending most of the day in the red, the Dow Jones industrials adding 10 10 points, back above 10000 after dipping below 9900 earlier in the day. The S&P 500 up three points, and the Nasdaq with a big comeback, finishing 15 points higher.

And Americans are borrowing less for the 11th straight month in December. That‘s the longest stretch of consecutive declines on record, meanwhile, the dollar surging to its highest levels since May against the euro. Investors are still worried about rising levels of European debt.

Cohen—quote—“allegedly abused anabolic steroids, displayed fits of rage and forced himself sexually on his ex-wife before their divorce, court documents reviewed by ‘The Chicago Sun-Times‘ show. Cohen also allegedly skipped child-support payments at the same time he was investing his own money, a total of more than $2 million, in his successful bid to become the Democratic nominee for lieutenant governor.”

Then it was that charge by a prostitute he was living with—well,

that‘s interesting in itself—he was living with a prostitute, apparently

who said he held a knife to her throat. Well, that would be enough for me right there.

Governor Pat Quinn and Senator Dick Durbin have both called on Cohen to step aside. Will he do it?

Lynn Sweet is an expert on Chicago politics. She‘s the Washington bureau chief for “The Chicago Sun-Times” a columnist for PoliticsDaily.com. And MSNBC contributor Jim Warren is the publisher of “The Chicago Reader” columnist for the Chicago News Cooperative.

I‘m want to start with Lynn, then go to Jim quickly.

Your thoughts. What the hell happened? Why would a guy like this, with this incredible stuff going on around him, how did he win without anybody reporting this in the press before he got the nomination this Tuesday night?

Lynn.

LYNN SWEET, COLUMNIST/WASHINGTON BUREAU CHIEF, “THE “Chicago Sun-Times”: Well, it was mentioned in a “Chicago Sun-Times” column, didn‘t get a lot of attention.

Chris, he poured millions of dollars into very good television ads where he talked about jobs, so that was a message. And his questionable background, which is so toxic, it threatens the whole top of the Illinois state ticket right now, just got ignored. A few of the other lieutenant governor candidates tried to send a message. But when there‘s no real party apparatus in Illinois, which there is not, there is no one to listen.

No one who was running wanted to take the chance of being the first guy to go negative on someone, might have opened the door to them getting knocked themselves. Big mess caused by the big self-financed campaign that this pawnbroker, unknown to everybody, had.

MATTHEWS: OK.

Jim Warren, this guy can‘t possibly win a general election. I will make that statement. You can join me or not. Will you join me with that assertion? He cannot win a general election with this kind of stuff around him.

JIM WARREN, MSNBC POLITICAL ANALYST: Well, if he cannot win a general election, remember, that probably means that Pat Quinn, the Democratic nominee and the governor, the successor to Rod Blagojevich, can‘t win either, because in Illinois they run together.

So, how many votes could Quinn conceivably lose if Cohen is still on the ticket? But I just want to add to something that Lynn said. I think that this is also an absolute, abject failure of not just the Democratic Party in Illinois not doing any vetting of Mr. Cohen, but also of the media.

Once upon a time you used to have editorial boards who would, like, do criminal checks on single possible candidate out there, even for dogcatcher. That‘s not happening.

There is evidence that there were folks on the Democratic Party who had some inkling of this, passed it off. It got no virtually no attention, except for one brief mention in “The Chicago Sun-Times,” in Mark Brown‘s column.

But you also had the fact there were four other candidates, two African-Americans. They probably split the vote. They didn‘t have much money. And $2 million got him over the hump.

And on the Republican side, a guy no one even—whose name nobody knows, a 27-year-old guy, absolute novice, similarly, no experience, he spent about $1.5 million of the family‘s lumber wealth to win on the Republican side.

MATTHEWS: OK. Great.

Well, this is the hell that breaks loose when you lose control of good journalism, you lose the great newspapers with sufficient political staff to look into these people, and you lose real political party organizations to check people out and in fact endorse the right people.

Here‘s more of the “Chicago Sun-Times” report—quote—“A prostitute with whom Cohen was living allegedly held a knife to her throat.” He did. “She showed police minor scars on her neck and hands. The charge was dropped when the woman failed to show up in court.”

Well, that is the weirdest thing. How can this guy who just won the nomination for lieutenant governor have a girlfriend, whatever her business, whether she‘s a massagist or whatever or she‘s prostitute, disappear from a court proceeding? That alone, it would seem to me, would be incriminating, Lynn Sweet.

By the way, how can the president escape this? This is—if this becomes the notion of what Chicago politics looks like, he‘s going to be entrapped in this. Your thoughts?

SWEET: Well, he‘s already concerned. I know that from people who were watching this. This—President Obama‘s not happy about how this turned out.

But there weren‘t just a few warnings. There were blares. And there are a lot of responsibility to blame on why this happened. But here‘s what Scott Cohen did not figure out, for all his millions of dollars. He could figure out a strategy to get nominated, but there‘s no strategy to get elected.

Either way, he‘s not going to be elected. He‘s either forced off the ticket, and there‘s—we will see how that unfolds. Last night, he was adamant about staying in, opened the door a little bit, saying if he heard from people, maybe he would change his mind.

But, right now, this is toxic to Pat Quinn‘s candidacy for governor.

MATTHEWS: I think he got that one.

By the way, here‘s the candidate for lieutenant governor, Cohen. Here‘s what he said in reaction to the prostitute‘s allegation, alongside his ex-wife. He stood, by the way—and tonight, let‘s listen to his defense of the charge he held a knife to a prostitute‘s throat.

(BEGIN VIDEO CLIP)

SCOTT LEE COHEN (D), ILLINOIS LIEUTENANT GUBERNATORIAL CANDIDATE: I

never knew her as a prostitute. She was a massage therapist. I still don‘t believe that she was a prostitute, even though, you know, she pleaded guilty to something.

It was a bad time in my life. You know, I was trying to put muscle on.

MATTHEWS: Here‘s some more of him on that program, “Chicago Tonight.” Let‘s listen to more of this guy who beginning to sound like a defendant, not a nominee. Here he is. Let‘s listen.

(BEGIN VIDEO CLIP)

COHEN: I assure you, I promise you, i never touched the woman. I never tried to cut her throat. I never did anything like that.

(END VIDEO CLIP)

MATTHEWS: “I never tried to cut her throat;” Jim, there‘s a campaign pledge. What do you make of ha? This guy is finished. This guy is finished.

WARREN: Well, let‘s see if he‘s finished. But we‘ll stipulate that he appears to be an absolute, total slug. I mean, this is, you know, rather incredible that we‘ve gotten to this point. Fortunately, there are no constitutional responsibilities in this office. Although, as we found out with Rod Blagojevich what can happen when the governor‘s out. This is the next guy who steps in.

You were talking about Obama. I wish I could claim this comment, but I was talking to a close friend of Obama‘s, a state legislator who said if Barack is Superman, Illinois is becoming his Krypton. It makes him weak.

MATTHEWS: Exactly.

WARREN: All you need now is the upcoming trial of Rod Blagojevich, which could conceivably, if the bumbling Republican party plays it right—and the Republican party is bumbling in this state—it could essentially be a big month-long infomercial for them.

MATTHEWS: Right. Not only, Lynn, could they win the governor‘s chair, they could win the Senate seat, Mark Kirk, once held by the president. But they could also use this as a hammer, as Jim said. Every time they decide they want to wack the president, they could say typical Chicago politician, which hurts, if this is the environment.

SWEET: They‘ve been doing this already. But right now, talk about the ammunition that the—that Scott Lee Cohen has given Republicans all over the nation, actually, because he‘s so—look at the sound bites you just used. The best thing he could say for himself is, well, I didn‘t try to cut her throat, but he had a knife to it? Come on.

This is real life. This is a real candidate who‘s running. People might be listening to it and think we‘ve made this up. And it‘s not. Chris, this is the second time in recent years, though, that an Illinois lieutenant governor candidate has come from nowhere. In 1986, there was Lyndon Larouche candidate who won, and Adlai Stevenson was first to—so we‘ve been through this. This time very serious ramifications. You don‘t need me to tell you that.

MATTHEWS: Thank you very much, Lynne Sweet and Jim Warren.

Up next, President Obama warns that health care reform could die in Congress. First time he‘s said that. This could be a problem in itself; just admitting it could open the door to defeat. This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. Here‘s something President Obama said the other night to his fellow Democrats, quote, “and it may be that if Congress decides that we‘re not going to be able to do it, even after all the facts are laid out, the options are clear, then the American people can make a judgement as to whether this Congress has done the right thing for them or not. That‘s how democracy works. There will be elections coming up and they‘ll be able to make a determination and register their concerns.”

The president there is talking about health care reform, the number one goal on his agenda. Melinda Henneberger is editor in chief of PoliticsDaily.com, and Chris Cillizza writes the Fix for the “Washington Post.”

Melinda, I guess this is either a big thing or a small thing, but there‘s the president, for the first time, allowing the fact he might lose on health care last night.

MELINDA HENNEBERGER, POLITICSDAILY.COM: Marching into battle to say, we could lose. I mean, Jimmy Carter—this looks so bad, so weak. You cannot do this. He‘s cutting off these Congressional Democrats who have really done their utmost. It‘s so significant.

MATTHEWS: Why isn‘t this on the front page today?

CHRIS CILLIZZA, “THE WASHINGTON POST”: I don‘t know. Because I work for a newspaper.

CILLIZZA: You know what, it may be slightly overwritten, Chris. But I think Melinda is right. The problem that you have is this: the president is up for re-election in 2012, fine. Maybe by then this whole health care blows over, whether it passes or it doesn‘t.

But people like Blanche Lincoln, people like Michael Bennett in Colorado and Arkansas, respectively, who voted for this bill, it does them no good to walk away from it politically, because they‘ve already voted for it once. They‘re going to get hammered on this. So there‘s probably not a good solution, because I think at this point your choice is walk away from it, or pass a bill that the majority of the American people do not support today, in hopes that you can convince them to support it before November, even though you‘ve not been able to convince them thus far. That‘s a very dangerous political proposition.

HENNEBERGER: But he looks so much worse by not even trying. It doesn‘t help his position for 2012, not at all.

CILLIZZA: It‘s like saying five days before the election, let‘s be honest, Martha Coakley is probably not going to win in Massachusetts. You have to—

MATTHEWS: He‘s obviously at least trying out the proposition that they can blame the Republicans for killing this. Let me try something else. Have you heard this buzz that they may be suggesting in the Senate they‘re going to let the Republicans filibuster like in the old days, bring the cots in, stay here all night, like “Mr. Smith Goes to Washington,” let the Republicans show their willingness to just kill this bill by talking it to death.

HENNEBERGER: Sure. I think that‘s fine. But to cede the whole battle before it‘s begun couldn‘t be worse.

MATTHEWS: Let‘s go to something more appetizing. Let‘s take a look at Eliot Spitzer here. This is Eliot Spitzer‘s come back. Let‘s watch him on “Colbert” the other night. Eliot Spitzer—we‘re going to go to break. Hang in there. I‘ve teased you. This is called a tease. We‘re going to talk about Eliot Spitzer, who is going to try to make a comeback.

By the way, I‘m wearing this red tie for the American Heart Association. It‘s red for women initiatives about women‘s heart disease. By the way, it‘s the number one killer of women. Join me in wearing red today. It‘s a little late to put a tie on, but if you go out tonight, put on one of these things. By the way, go to GoRedForWomen.org for more.

We‘ll be right back with Melinda Henneberger and Chris Cillizza to talk about whether Eliot Spitzer, as I said, might be making a come-back. You‘re watching HARDBALL, only on MSNBC.

COLBERT: Yes. You‘ve got no public image to uphold. It‘s better if you don‘t uphold your public image at this point.

SPITZER: There is a certain virtue to being able to tell the absolute truth and stick it to people without worrying about repercussions. That is true.

COLBERT: Exactly. There‘s nothing they‘ve got on you.

SPITZER: Not anymore.

COLBERT: OK. All right.

(END VIDEO CLIP)

MATTHEWS: So what is Spitzer up here to? We‘re back with Melinda Henneberger of PoliticsDaily.com, and the “Washington Post‘s” Chris Cillizza.

He looks like he‘s trying to weasel his way back into public electoral life.

CILLIZZA: I‘ve talked to a number of people in New York in the last 48 hours. He wants to run for something, there is no question about that. But I‘ve been told by a very senior Democratic source, Spitzer will not run for anything in 2010. Eliot Spitzer will attempt to be back in public life, very likely in 2012. What office that will be, who knows. But this is someone who has spent his entire life seeing the direct path from attorney, governor, president of the United States.

MATTHEWS: Is this feasible a guy who cheated on his wife with professional sex workers on a relentless basis—relentless basis, not once, relentlessly. Can that guy claim the public trust one more time.

HENNEBERGER: Eliot Spitzer‘s problem is not that he had sex with hooker. It‘s not even that he had sex with his socks on. It‘s that he did something for which he was prosecuting other people, and that‘s a problem.

MATTHEWS: He prosecuted people for that?

HENNEBERGER: Yeah. Nevertheless, I personally love the idea of the post scandal politician who doesn‘t have to pretend to be the most wonderful husband in the world, and who really maybe can do the right thing, like it took George Ryan to empty death row in Illinois, because he himself was on his way to prison. I do think there‘s a period—

MATTHEWS: Maybe Ryan was looking for sympathy. Let‘s take a look at the Daily Beast—he asked Spitzer about a comeback. Here is what Spitzer told him, quote, “I would hate to dissuade from the story. But just to disabuse you, there are two things you mentioned that I‘m not big on. One is hard work. The other is humility. Other than that, I like what you‘re saying.” I don‘t know what that all means.

CILLIZZA: He‘s being truthful, half of that. He‘s extremely hard working. No one, I think, would dismiss—he‘s extremely hardworking and extremely ambitious. He is not the most—he‘s not someone who is particularly self aware or has a lot of humility. But if that kept you out of politics, we wouldn‘t have a very big Congress.

MATTHEWS: Let me look at some of that. He said something else here which I really do like what he said, because this is so true and so humble. I love it. Quote, “I have no illusion that I could ever get this piece of my life to fade significantly into the background.” Into the—let‘s listen. He‘s doing it on tape. Let‘s listen to him.

(BEGIN VIDEO CLIP)

SPITZER: I have no illusion that I can ever get this piece of my life to fade significantly into the background. It was too much of media hysteria about it, and I‘m not saying improperly. So it‘s there. You come to grips with that.

All you can do is step back and say, OK, move forward and try to continue to do something useful. And over time, perhaps, that will cause people to say, OK, the other piece of his life is one aspect, but there are other aspects as well.

MATTHEWS: He‘s like a high school kid opening up a star fish. He‘s talking about himself there with such detachment.

HENNEBERGER: Well, he‘s a smart guy. And I think he make as point that there‘s got to be some role for him. I mean, why shouldn‘t we use his expertise that we obviously really need.

MATTHEWS: Well, you are unbelievable. Why do you want this guy back in public life? I don‘t get it.

CILLIZZA: The question he will face—

MATTHEWS: There‘s 300 million people in this country. We‘re going back into the dead file.

HENNEBERGER: Maybe not.

CILLIZZA: The question he‘ll face when he runs, Chris, is judgment.

Let‘s be honest. He made a very bad decision.

MATTHEWS: This show covers politics. We have talked about what, Blagojevich tonight, this incredible character who had to put a knife up to the throat, allegedly, of a prosecutor he was living with, and didn‘t know she was a prostitute. Now we‘re back here with Spitzer, a serial customer of—it‘s hard to keep up with these guys. Bring back Trafficant. Let‘s have a whole show with these guys on it.

By the way, the other night, I saw something wonderful, and you saw it too, the Lincoln-Douglass Debate, called “The Rivalry” at Ford‘s Theater. It reminds you of how wonderful American politics can be. Lincoln running for the United States Senate in 1858 in Illinois, up against a real heavy weight, Steven Douglas. After he beats Douglass for the presidency, Douglass goes down to the south and spends the longest time trying to woo the south back into the union, as a Democrat, trying to get fellow Democrats, loses his health doing it. I get chills thinking about how American that was.

HENNEBERGER: I wrote a column after I saw the show, I thought it was so fantastic, not where is our Lincoln—

HENNEBERGER: “Where is our Douglass” was the headline on my column, the guy who, humiliated by Lincoln, goes back to Illinois and saves Illinois for the union, who really does ruin himself, who died while he was on that errand for Lincoln, and who knowing that it would kill his chances, what chances were left to become president in the 1860, went to the south and told the truth.

MATTHEWS: Last Friday, Chris, we saw a bit of that, which was the president going to the enemy camp, if you will, to the Republicans and having a real debate with them. American politics can be elevated. It can be great. Why we have to go back into the garbage cans and get these politicians—you are such a liberal. You‘re such a forgiver.

Anyway, Melinda Henneberger, thank you. Chris Cillizza—lower case L. Join us again Monday night at 5:00 and 7:00 Eastern for more HARDBALL. Right now it‘s time for “THE ED SHOW” with Ed Schultz.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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In a highly-anticipated speech to Congress Tuesday, Israeli Prime Minister Benjamin Netanyahu argued that a potential nuclear deal being negotiated by major powers including the United States "paves Iran's path to the bomb."